Inventory Impairment Risk Assessment Report for TCL Zhonghuan (002129.SZ)

TCL Zhonghuan New Energy Technology Co., Ltd. is one of the leading enterprises in China’s photovoltaic wafer industry. Together with LONGi Green Energy, the two companies account for over 50% of global wafer production capacity [1]. The company is mainly engaged in the R&D, production and sales of photovoltaic wafers and semiconductor wafers, with businesses covering the entire photovoltaic industry chain.

Since 2024, the photovoltaic industry has entered a deep adjustment period. According to data from the China Photovoltaic Industry Association (CPIA), global wafer production capacity reached 1394.9GW in 2024, with China accounting for 96.7% of the total; global wafer output was 803GW, with China contributing 96.6% [1]. The industry is facing severe overcapacity issues. Silicon material prices have fallen sharply from their 2023 highs, hitting a low of around RMB 30,000-40,000 per ton in 2024, and are expected to gradually recover to RMB 50,000-53,000 per ton in 2025 [2]. Prices across all segments of the photovoltaic industry chain continue to be under pressure, and enterprises generally face loss pressures. Companies such as EGing Photovoltaic have seen negative net assets due to inventory write-downs [3].

---

Year	Inventory Balance (RMB 100 million)	YoY Change	% of Current Assets	% of Total Assets
2022	42.89	-	16.34%	5.31%
2023	59.16	+37.94%	18.62%	7.44%
2024	63.24	+6.90%	19.59%	4.94%

The data shows that TCL Zhonghuan’s inventory balance has continued to grow. Inventory reached RMB 6.324 billion at the end of 2024, representing a 47.45% increase from 2022 [4]. The proportion of inventory in current assets rose from 16.34% in 2022 to 19.59% in 2024, indicating that inventory has become increasingly important in current assets. The proportion of inventory in total assets fell to 4.94% in 2024, mainly due to the expansion of the company’s total asset scale from capacity expansion.

Based on 2024 annual report data, TCL Zhonghuan’s inventory mainly includes:

• Raw Materials
  : Silicon feedstock, polysilicon, and other production materials
• Work-in-Progress
  : Semi-finished products such as silicon rods and silicon ingots
• Finished Goods
  : Various specifications of finished wafers

As a leading wafer enterprise, raw materials and finished goods account for a relatively high proportion of the company’s inventory. Considering the price volatility characteristics of the photovoltaic industry chain, sharp changes in silicon material and wafer prices directly affect the net realizable value of inventory.

---

:

• 2024 Gross Margin:
  -22.86%
  (severely inverted)
• 2024 Net Profit:
  -RMB 9.818 billion
• 2025 Expected Net Loss:
  RMB 8.2-9.6 billion
  [5]

A negative gross margin means the company’s production costs are higher than selling prices, which directly leads to the net realizable value of inventory being lower than its cost. According to accounting standards, when inventory cost is higher than net realizable value, inventory write-down provisions should be made. TCL Zhonghuan’s 2024 gross margin plummeted from 16.80% in 2023 to -22.86%, a drop of nearly 40 percentage points, indicating a significant increase in inventory write-down risk [4].

In 2024, prices across the photovoltaic industry chain experienced sharp fluctuations:

• Silicon Material Prices
  : Around RMB 80,000-100,000 per ton at the start of 2024, falling to RMB 30,000-40,000 per ton in the middle of the year, and recovering to RMB 50,000-53,000 per ton in 2025 [2]
• Wafer Prices
  : Fell by approximately 12% in 2024 (annual data) [2]
• Cell Prices
  : Rose by 7% in 2024, but profitability will still be under pressure in 2025

According to Eastmoney data, prices across the photovoltaic industry chain declined in Q4 2025, with wafer prices continuing their downward trend, and no obvious signs of a price floor have emerged in the market [6]. Such continued price volatility increases the uncertainty of inventory impairment.

Indicator	Value	Industry Comparison
Inventory Turnover Rate	~5.6 times/year	Industry Average ~4-5 times
Inventory Turnover Days	~65 days	Industry Average 60-90 days

TCL Zhonghuan’s inventory turnover efficiency is relatively good, with a turnover period of approximately 65 days, which is better than the industry average [4]. This indicates that the company’s inventory management capabilities are relatively strong, and inventory backlog periods are relatively short, which reduces inventory impairment risk to a certain extent. However, against the backdrop of weak overall industry demand, inventory turnover still faces pressure.

The photovoltaic industry is currently in a deep adjustment period, with the main characteristics including:

• Overcapacity
  : Global wafer production capacity reaches 1394.9GW, far exceeding actual demand
• Price Competition
  : Severe “involution” competition exists across all segments of the industry chain
• Policy Intervention
  : The state is promoting “anti-involution” in the photovoltaic industry, strictly controlling sales below cost [7]
• Enterprise Differentiation
  : Losses of leading enterprises are narrowing, while second- and third-tier enterprises face survival crises

EGing Photovoltaic’s module production capacity utilization rate was only 35% in 2025, and it has recognized impairment provisions for inventory and fixed assets, with expected negative net assets at the end of the period, facing delisting risks [3]. This serves as a warning for enterprises such as TCL Zhonghuan.

---

Risk Factor	Risk Level	Score (1-10)	Explanation
Inventory Scale	Medium Risk	7	RMB 6.324 billion, accounting for 4.94% of total assets
Price Volatility	High Risk	8	Sharp decline in wafer prices in 2024
Turnover Efficiency	Lower Risk	4	65-day turnover period, better than industry average
Industry Cycle	High Risk	9	Overcapacity and deep industry adjustment period
Policy Environment	Medium Risk	5	“Anti-involution” policy is being implemented

Based on the above analysis,

. The main basis is as follows:

1. Negative Factors
   :
   • Severely negative gross margin (-22.86%), putting pressure on the net realizable value of inventory
   • The industry is at the bottom of the cycle, with high uncertainty in price fluctuations
   • Large losses for two consecutive years, with an expected loss of RMB 8.2-9.6 billion in 2025 [5]
   • High industry inventory levels, continuous destocking pressure

2. Positive Factors
   :
   • Relatively good inventory turnover efficiency (65 days)
   • Cash and cash equivalents of RMB 12.8 billion, relatively abundant liquidity [4]
   • “Anti-involution” policy promotes improvement in the industry’s supply side
   • Silicon material prices have rebounded since the second half of 2025

---

Estimated based on the following assumptions:

• Inventory cost is approximately RMB 6.324 billion
• Assuming net realizable value declines by 15-25% compared to cost (considering price declines and gross margin inversion)
• Expected inventory write-down provision range:
  RMB 0.95-1.58 billion

This estimate is for reference only, and the actual impairment amount depends on management’s judgment and auditor’s assessment.

1. Annual Report Disclosure
   : Focus on the inventory write-down provision in the 2024 annual report
2. Inventory Turnover Trend
   : Track changes in inventory turnover in each quarter of 2025
3. Product Price Trends
   : Continuously monitor changes in silicon material and wafer prices
4. Policy Impact Assessment
   : Focus on the implementation effect of the “anti-involution” policy

• The timing and magnitude of the photovoltaic industry cycle reversal are uncertain
• Changes in international trade policies may affect export demand
• Technological iteration may lead to obsolescence of existing inventory
• Accelerated industry integration and exit of small and medium-sized enterprises may trigger price fluctuations

---

[1] Sina Finance - Policy Dividend Ends, Industrial Logic Restructured: Detailed Explanation of Adjustments to Export Tax Rebates for Photovoltaic and Battery Products (https://finance.sina.com.cn/stock/relnews/cn/2026-01-14/doc-inhhfrsx8512754.shtml)

[2] Eastmoney - Guojin Securities Industry Weekly (https://pdf.dfcfw.com/pdf/H3_AP202512211805193358_1.pdf)

[3] NetEase News - Once the “First Stock” in the Photovoltaic Module Industry Faces Survival Crisis (https://www.163.com/dy/article/KJ92QVDM0519DDQ2.html)

[4] Jinling API Data - TCL Zhonghuan (002129.SZ) Financial Statements

[5] Eastmoney - TCL Zhonghuan (002129) Individual Stock Information (http://quote.eastmoney.com/sz002129.html)

[6] Ruida Futures Morning Meeting Minutes (https://www.rdqh.com/content/show/61/200445)

[7] CICC Research - 2026 Outlook | PV & Energy Storage: PV Bides Time for a Turning Point, Energy Storage Booms (https://finance.sina.com.cn/stock/stockzmt/2025-12-26/doc-inheaqmr2648003.shtml)